Now trading XLB

XLB is in the same relative strength position as when we opened this trade. On ETFScreen.com the XLB is second, after the SPDR Utilities fund, XLU. XLU has again spiked to the top as a result of the recent market volatility and investor’s run towards stability of yield. This will subside and XLU will quickly fall away from the top spot, leaving XLB in charge. XLB is the Select Sector SPDR Materials fund. Top five holdings inside XLB are Du Pont, Monsanto, Dow Chemical, Praxair, and LyondellBasell. Just the fact that XLB is so strong is telling us that there is huge money flow into these companies, and they are not high-tech companies with quickly changing markets. These companies have lines of business that grow and shrink based on long-term trends that, once established, will continue for a very long time. We can be confident that if this trend were a moving weight, it would weigh one million pounds, and then require two million pounds to change it’s direction.

Our trade is to sell naked puts on XLB using the Deep Pocket Options method of position building. Subscribers get those details. Our current position is short 9 puts at 3 different strike prices, spread out over multiple expiration dates. The DIA-Weighted Delta is about 175 and daily time decay (Theta) is about $50. Since opening the position, our P/L is now positive $160. We are committed to buy as many as 900 shares, but it appears that a good portion of our open contracts will expire or be closed this week. We will continue to trade around the position and may sell some weekly calls on a day when it is up, or sell more puts on a day when it is down. The current position gives us many choices to continue to increase it’s profitability.

A quick update on the WalMart trade – it is now down $275 since inception, but remember this position was down $2500 on February 10. Our DIA-Weighted Delta is near zero and our daily time decay (Theta) is $40. It has been a struggle to get this position to profitability, but money is never given away. It is always earned, one way or another. If someone tries to tell you that trading options is easy, be careful. It’s true that trading options is easy – the hard part is actually making money at it! Our WalMart trade is turning out to be a great learning lab for beginning traders. We will continue to discuss it here, and it will become consistently profitable soon. We think about each position as a new “product line” in our “stock insurance” store. Some product lines take off immediately and go profitable, others take some time. When you operate with a business plan, you have a structure to follow when things need extra work to get to profitability. We want every position to be profitable – otherwise, why bother?